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Business has gone through a dramatic transformation in recent years. So has warfare.

Every executive knows firsthand the daunting challenges of the twenty-first-century business environment: rapid and disruptive change, fleeting opportunities, incomplete information, an overall sense of uncertainty and disorder. While military commanders have long faced such challenges on the battlefield, meeting them has be come even more difficult in today’s world of electronic weaponry, blurred battle lines, and amorphous enemies.

Military strategy, like business strategy, has had to evolve in response to the changing environment. This has led to the growing focus on an approach to armed conflict called maneuver warfare. Recognized as a viable combat philosophy for the past 65 years, maneuver warfare risen to prominence in the past decade because it is so well suited to today’s combat environment. Although designed for the battlefield, the approach offers a novel and useful way to think about business strategy, allowing executives to capitalize on—rather than succumb to—the formidable challenges they now face.

Maneuver warfare represents—in the words of the United States Marine Corps doctrinal manual, Warfighting—“a state of mind bent on shattering the enemy morally and physically by paralyzing and confounding him, by avoiding his strength, by quickly and aggressively ploiting his vulnerabilities, and by striking him in a way that will hurt him most.” Its ultimate aim is not to destroy the adversary’s forces but to render them unable to fight as an effective, coordinated whole. For example, instead of attacking enemy defense positions, maneuver warfare practitioners bypass those positions, capture the enemy’s command-and-control center in the rear, and cut off supply lines. Moreover, maneuver warfare doesn’t aim to avoid or resist the uncertainty and disorder that inevitably shape armed conflict; it embraces them as keys to vanquishing the foe.

Maneuver warfare doesn’t aim to avoid or resist the uncertainty and disorder that inevitably shape armed conflict; it embraces them as keys to vanquishing the foe.

Despite the oft-cited analogy between warfare and business, military principles clearly can’t be applied wholesale in a business environment. The marketplace is not, after all, a battlefield, if only because lives aren’t at stake. That said, companies do compete aggressively even viciously—for strategic advantage in a chaotic arena that is increasingly similar to the modern theater of war.

Consequently, while the battle metaphor in some settings may seem facile or ill considered, we believe concept of maneuver warfare is directly relevant to business strategy, precisely because it has been developed address conditions that in many ways mirror those faced by modern executives. Furthermore, the approach—with its focus not on overpowering a rival but on outflanking him, targeting his weaknesses, and rendering him unable to analyze the situation—can help a company to achieve a decisive advantage with a minimal deployment of resources. This is of particular interest in today’s business environment, when many companies are hesitant to over-commit their resources.

The Nature of War

Warfare, in general, takes place on multiple levels. On the physical level, it is a test of firepower, weapons technology, troop strength, and logistics. At the psychological level, it involves intangibles such as morale, leadership, and courage. At the analytical level, it challenges the ability of commanders to assess complex battlefield situations, make effective decisions, and formulate tactically superior plans to carry out those decisions.

If these dimensions seem familiar to most business executives, so too will the four human and environmental factors that, according to Warfighting, shape military conflict. Friction is the phenomenon that, in the words of the manual, “makes the simple difficult and the difficult seemingly impossible.” The most obvious source of friction is the enemy, but it can also result from natural forces such as the terrain or the weather, internal forces such a lack of planning or coordination, or even mere chance.

Uncertainty is the atmosphere in which “all actions in war take place”—the so-called fog of war. Uncertainty about environmental factors and about the opponent’s intentions and capabilities clouds decision makers’ judgment, prohibiting the optimal deployment of resources.

Fluidity describes the battlefield situation in which each event “merges with those that precede and follow it—shaped by the former and shaping the conditions of the latter—creating a continuous, fluctuating flow of activity replete with fleeting opportunities and unforeseen events.” Combatants must constantly adapt to these changing conditions and seek to actively shape emerging events. There are few breaks in the action or opportunities for decisions to be made sequentially.

Combined, these three factors constitute the final attribute of military conflict, the state toward which warfare naturally gravitates: disorder. “In an environment of friction, uncertainty, and fluidity,” according to the Marines’ manual, “plans will go awry, instructions and information will be unclear and misinterpreted, communications will fail, and mistakes and unforeseen events be commonplace.” Quite simply, disorder implies a competitive situation that deteriorates as time progresses.

Functioning—or even surviving—in such an environment is a major challenge. But military commanders, as well as business executives, must be sure that their troops do more than survive: They must prevail. Because these four factors can rarely be controlled, successful commanders will opt for the only viable alternative—using them to their own advantage. That is the notion at the core of maneuver warfare: Instead of being undermined by disorder, military commanders turn friction, uncertainty, and fluidity against the enemy to generate disorder in his ranks, ideally creating a situation in which the opposition simply can’t cope.

Instead of being undermined by disorder, military commanders turn friction, uncertainty, and fluidity against the enemy to generate disorder in his ranks, ideally creating a situation in which the opposition simply can’t cope.

This idea isn’t completely new. Elements of maneuver warfare theory first appeared in the writings of Sun Tzu and were practiced at the Battle of Leuctra in ancient Greece. More sophisticated applications of maneuver warfare principles generated successes for Napoléon and Confederate general Stonewall Jackson. But the 1937 publication of Infantry Attacks by well-known German military officer Erwin Rommel was the first broadly disseminated articulation of maneuver warfare’s modern conceptual foundation—which was validated shortly thereafter by the success of German blitzkrieg tactics during World War II. Since then, maneuver warfare resulted in decisive victories for the Israeli Defense Force in the Arab—Israeli Wars of 1967 and 1973 and for the Coalition Forces in Operation Desert Storm in 1991.

With the publication of Warfighting in 1989, the U.S. Marine Corps—once a devil-be-damned, charge-up-the-middle outfit—formally adopted maneuver warfare as its doctrinal philosophy. Although the philosophy is tailor-made for the Marines—a small, light force with relatively few resources—maneuver warfare in recent years has also achieved a prominent place in U.S. military thought in general.

The Elements of Maneuver Warfare

Maneuver warfare, as we have distilled it from Warfighting, has seven guiding concepts. Taken as a whole, they provide a useful framework for thinking about business strategy. For each concept—described in part using the actual language of Warfighting—we’ll give examples of how it has been successfully executed in both military and business contexts.

Targeting Critical Vulnerabilities.

A practitioner of maneuver warfare continually analyzes a rival with the aim of discovering those fundamental weaknesses that, “if exploited, will do the most significant damage to enemy’s ability to resist.” Once the opponent’s Achilles’ heel is identified, resources must be marshaled and decisively to capitalize on the opportunity. Minimizing the lag time between the identification of the weakness and its exploitation maximizes the effectiveness of the resources deployed in this effort.

At the Battle of Isonzo in World War I, then-Lieutenant Rommel, commanding a small detachment of three companies of light infantry, targeted a key mountain pass used as a main supply route by the Italian opposition. The capture of this pass, the Italians’ critical vulnerability, caused the collapse of the northern part of their entire front, which consisted of thousands of well-positioned troops. To reach the pass, Rommel identified gaps in each of defensive lines, bypassed enemy strong points, and attacked Italian defenders from the rear. In just 52 hours, his force captured 150 Italian officers, 9,000 soldiers, and 81 heavy guns while incurring casualties of only six dead and 30 wounded. Rommel applied such tactics again during World War II as a field marshal in North Africa, earning himself the nickname “Desert Fox.”

In a similar fashion, upstart MCI identified a vulnerability of AT&T’s in the long-distance market in the early 1980s—the then-regulated incumbent’s reliance on copper cable. MCI quickly exploited this reliance by deploying a wireless microwave technology that eliminated the expenses—labor in particular—associated with laying copper cable. It also laid higher-capacity fiber-optic lines. And it launched and won litigation that required AT&T to grant other carriers access to its circuits, thereby enabling MCI to pick off the incumbent’s customers. These developments afforded MCI a fundamental advantage in the costs of building and operating telecommunications networks. MCI also attacked AT&T in less-defended geographical markets, where initial successes provided a growing revenue base that supported further expansion of MCI networks.

Boldness.

One key to battlefield success is having the daring to seek breakthrough results rather than incremental ones. This requires shifting resources to endeavors with uncertain—sometimes highly uncertain—outcomes. Informed estimates of the resources needed to capture, maintain, and defend a position, and of the potential benefits of doing so, can often reduce the risk of such a move. But sometimes there are not enough data to make an estimate. Or the information that does exist may suggest a cautious approach. Maneuver warfare calls for a commander, on occasion, to take action despite data that are inconclusive or downright discouraging. While risk taking “must be tempered with judgment lest it border on recklessness,” it is sometimes needed to achieve a major victory.

General Douglas MacArthur’s amphibious assault at Inchon in 1950 during the Korean War is considered one of the boldest attacks in modern military history. Because of the challenges posed by tides, mudflats, the narrowness of the channel, and steep embankments on shore, both sides considered Inchon to be the worst possible location for an amphibious landing. Consequently, the North Koreans devoted few resources to defending it. MacArthur was well rewarded for his risky assault there: His forces moved from Inchon to capture Seoul and isolate North Korean forces in the south of the country, dramatically altering the momentum of the war in favor of the United States.

In 1993, Lou Gerstner assumed the formidable challenge of turning around declining computer maker IBM. Four years later, he had succeeded—by boldly refocusing the massive company. His decision to do so was based not on compelling analytical data—indeed, he defied the general industry consensus—but on anecdotal evidence. When he took over IBM, technology players and pundits alike dismissed the mainframe as irrelevant in the disaggregated world of networked computing. When talking with customers, though, Gerstner kept hearing that large corporations still wanted a specialized outsider to formulate their technology strategies and build and operate their complex networked systems. Accordingly, he halted existing reorganization plans and bet IBM’s future viability on its mainframes and services businesses. Under Gerstner’s watch, IBM invested heavily to overhaul and revive its line of mainframes, which he believed would still be necessary to tie networks together in much the same manner that servers did. And he leveraged IBM’s customer relationships and well-recognized brand to expand the company’s presence in higher-margin, value-added services. Although both decisions were widely perceived as ill advised, by late 1996, mainframe sales were booming, computer services had become IBM’s biggest growth business, and Gerstner was heralded as Big Blue’s savior.

Surprise.

Striking a foe in an unexpected manner can disorient him and ensure that his response comes too late to be effective. To accomplish this, a commander take steps to degrade the quality of information available to the enemy, thereby impairing his ability to prepare for the attack.

Surprise can be achieved by using one of three approaches: stealth, ambiguity, or deception. Stealth is used to “deny the enemy any knowledge of impending action.” It keeps rivals in a state of unawareness until sudden, unexpected action is taken. Denying critical information to the enemy minimizes or even eliminates the threat of retaliation.

The first blow of the 1967 Arab—Israeli War, in the Israeli air force launched a devastating air attack against all of the Egyptian air force bases, was based stealth. Careful planning of departure times and approaches ensured that the attacks occurred simultaneously; consequently, none of the bases was able to alert the others to the strike. The Egyptians were not aware of the attack until some 300 of their aircraft, almost their entire air force, had been destroyed on the ground.

In the mid-1990s, commercial airlines established Web sites to provide general information to customers. As the functionality of these sites expanded, customers could reserve and purchase tickets directly from them. Once the number of on-line orders reached a critical mass, Delta Airlines, in a move quickly emulated by other airlines, surprised unsuspecting travel agents by slashing commissions, from 10% of the value of each ticket sold to a flat $50 (and later $35) per ticket. While the threat to agents of travelers buying directly from the airlines had been evident all along, the greater threat of declining commissions had not. Because travel agents weren’t aware of the power shift that the Internet enabled, they were unprepared to launch effective countermeasures.

Ambiguity, “to act in such a way that the enemy does not know what to expect,” represents an effort to confuse a rival and make him commit his resources to a number of potential combat scenarios. Doing this spreads those resources so thin that the enemy becomes vulnerable on any number of fronts. In Operation Desert Storm, the direction of the Coalition Forces’ attack was so unclear to the Iraqis that their defenses became too widely dispersed to be effective. The Iraqis were forced to allocate combat resources to three potential lines of advance, all of which seemed, based on the Coalition Forces’ activity, possible avenues of attack. Although Iraq maintained the fifth-largest land army in the world at the time, preparing for every eventuality inevitably exposed a weakness, the lightly defended western end of the Iraqi line, around which the coalition ultimately attacked.

Microsoft relies on ambiguity when it announces plans for across-the-board upgrades to its software or operating systems. Challengers to Microsoft’s dominance, whose software products must offer an array of features that at the least matches those offered by Microsoft, have choice but to respond to every potential change. Microsoft’s caginess about the ultimate configuration of its upgrade gives it a tremendous cost advantage over competitors: Because it never implements all of the announced changes, Microsoft incurs costs only for those features that it actually upgrades.

Deception, “to convince the enemy that we are going to do something other than what we are really going to do,” is designed to cause a rival to deploy resources erroneously. Such a signal can take the form of a deliberate release of misinformation or the more subtle form of distorted information left “on display,” with the anticipation that the opposition will observe it. Deception is the most difficult of the three means of surprise to implement, but it is also the most effective.

During World War II, the Allies used deception to prevent the Germans from determining when and where the D-day invasion would occur. To reinforce the German High Command’s belief that Pas de Calais, France, was the most likely location for an Allied amphibious landing, General George S. Patton was placed “in charge” of a fictitious landing force consisting of dummy tanks, oil storage depots, airfields, and landing craft—all visible to both air-based and human intelligence agents. The Allies also bombed the Calais region more severely than the Normandy area, used double agents to convey misinformation, and created false radio traffic to create the illusion a large invasion force being marshaled in the southeastern corner of England. These measures were so effective that the Germans waited to respond until after the invasion at Normandy began, and even then, they only partially committed troops to the area.

Modern Marching Orders

Maneuver warfare, a military strategy that has taken a prominent place in modern military thought, offers useful lessons to business executives, who face many of the same challenges as today’s military commanders. The concepts of maneuver warfare, while valuable individually, are most powerful when applied in an integrated fashion.

Targeting Critical Vulnerabilities. Analyze and probe competitors with the aim of identifying and rapidly exploiting those weaknesses that will do the greatest damage to their competitive position.

Boldness. Take calculated risks that have the potential to achieve major, market-shifting results.

Surprise. Use stealth, ambiguity, and deception to degrade the quality of information available to competitors and impair their ability to deploy resources efficiently.

Focus. Concentrate resources at critical points and times to capitalize on key market opportunities.

Decentralized Decision Making. Give authority to those who are closest to the point of decision and who possess superior local information. Align these individual decisions by communicating “commander’s intent”—the desired final result—throughout the organization.

Rapid Tempo. Identify opportunities, make decisions, and implement plans more quickly than competitors do in order to seize the initiative and force them into a constant state of reaction.

Combined Arms. Look for ways to combine resources so that the returns generated by the whole are greater than those generated by the individual parts.

Anecdotal evidence indicates that Merrill Lynch employed deceptive measures to deter competition from other securities firms when it introduced the cash management account in the late 1970s.The CMA was an all-purpose brokerage account for securities that, by offering a money market fund, a checkbook, and a credit-debit card, infringed on activities traditionally reserved for commercial banks. And because it offered an interest rate of 12.5%, compared with the banks’ 5.5%, it seized market share from the banks, which retaliated with numerous lawsuits alleging violation of the Glass-Steagall Act. Although Merrill Lynch never lost one of those suits, it drew media attention to the suits to deter rival brokerage houses from offering a similar product, essentially giving the company a five-year lead in the lucrative CMA market.

Focus.

In order to seize key opportunities, a commander must often deploy resources in a concentrated manner. This “generation of superior combat power at a particular time and place” enables a smaller force “to achieve decisive local superiority,” providing an advantage when and where it matters most. In carrying out this aim, commanders are hindered by two factors. First, a scarcity of sources means that concentrating them in one area requires reducing them—and increasing the risk of vulnerability—elsewhere. Second, a variation in the fungibility of resources means that shifting them is more difficult in some cases than in others.

Despite being outnumbered by almost 1 million soldiers and by a ratio of 3:2 in artillery pieces and tanks in France in 1940, the German army smashed through the center of the French line, its weakest point, and brought the French army its knees. The Germans achieved this overwhelming victory by focusing 510 bombers,200 fighter aircraft, and 45 divisions against nine French divisions in the lightly defended Ardennes forest. Although successful, this focused attack was not without risk. The scarcity of the Germans’ combat assets left their positions in the north thinly held and thus, vulnerable to counterattack.

In the late 1980s, Toyota focused $500 million and its engineering might on an emerging U.S. market segment of young, affluent, but price-sensitive luxury-car buyers. These customers wanted the quality and performance of a European automobile but were not willing to pay a substantial premium. Toyota’s flagship model for its new luxury car line, the Lexus LS 400, combined a sleek design, high performance, and the most advanced automation in manufacturing to date. To maximize efficiency in manufacturing and responsiveness to customer tastes and preferences, Toyota kept the less fungible manufacturing function in Japan and moved design specialists to California, the heart of the target market. U.S. luxury brands could not compete with the Lexus’s exceptional quality, reliability, and performance; European automakers, such as Jaguar, Mercedes, and BMW, could not hope to match its $35,000 base price. In its first year, the Lexus quickly gained market share and established itself as a premier marque among luxury automobiles.

Decentralized Decision Making.

Pushing significant decision-making authority down through the ranks allows a military force “to best cope with the uncertainty, disorder, and fluidity of combat.” The decisions of subordinate leaders, however, must be consistent with and further the “commander’s intent”—that is, the desired final objective. The aim is to give those closest to the action the latitude to take advantage of on-the-spot information unavailable to their superiors while carrying out their broad strategic aims.

Giving frontline personnel the freedom to exercise initiative can increase the likelihood of both nonlinear accomplishments and “reconnaissance pull.” The former refers to situations in which an extraordinary act by an individual disproportionately determines the course of large-scale competitive encounters. The latter refers to a situation in which an individual identifies an opportunity, pulls the organization toward it, and then leads the organization in its exploitation.

General Patton once said, “Never tell people how to do things. Tell them what to do, and they will surprise you with their ingenuity.” During the Normandy Breakout of 1944, Patton led his Third Army with a series of half-page operations orders, pushing the German front from the Normandy beachhead east through France. Most commanders communicated tactical plans to such a large force through a lengthy and detailed document.

Shortly after assuming the role of CEO at Continental Airlines in 1994,Gordon Bethune symbolically burned the company’s oppressive, inflexible, and unpopular customer service manual. He gave employees considerable latitude to make impromptu decisions regarding customer service. But to ensure that employees’ actions were consistent with the organization’s strategic objectives, Bethune repeatedly emphasized the need to improve in the airline industry’s three most important metrics: customer satisfaction, lost baggage, and on-time arrivals. Employees often responded to this greater responsibility with nonlinear decisions. For example, a flight attendant on a full flight short of meals might decide to close the doors, making an on-time departure possible. By giving free drinks to business-class passengers in lieu of a meal, the attendant ensures that an entire planeload of people is happy, no one misses a connection—and no one stays a hotel at the airline’s expense. Collectively, such frontline decisions were the driving force behind Continental’s widely heralded turnaround.

Rapid Tempo.

Speed is clearly crucial to maneuver warfare, but the relevant measure is not absolute speed. Rather, success is based on relative speed—that is, identifying opportunities and making decisions more quickly than one’s opponent, thereby forcing him into a constant state of reaction. Ideally, in a multiperiod encounter, he will fall increasingly behind “until eventually he is overcome by events.” Alternatively, in a multiple-arena encounter, the practitioner of maneuver warfare can move among the arenas so rapidly that the enemy is never sure where he is being engaged. To achieve this advantage, a commander need not actively undermine his rival’s ability to maintain a certain pace of action; he may simply exploit fundamental differences between his rival’s speed and his own.

In the Battle of Britain, use of coastal radar by the British meant that their senior aviation officers could assess threats and transfer combat-ready squadrons into crucial engagement areas to meet each incoming German bombing raid more quickly than the Germans could reconstitute and redistribute attack squadrons. Heavy losses of German aircraft and pilots, resulting from the fact that they were constantly facing fresh British pilots in well-functioning planes, eventually forced the Germans to cease daylight bombing raids and conduct less effective night attacks.

Jenny Craig, the chain of weight-management centers, set a rapid tempo to deliver a decisive blow to rival Nutrisystem in the 1980s. In this market, where diet centers were deriving almost all of their profits from the sales of portion- and calorie-controlled food products, Nutrisystem achieved an initial advantage by introducing a series of product improvements: freeze-dried food, boil-in pouches, and later, microwavable pouches. Because Nutrisystem was primarily a chain of franchises, each product improvement required the franchisees to invest in new food storage capacity and accompanying advertising campaigns. Further introductions required the approval once again of countless franchise owners. Jenny Craig, a tightly controlled hierarchy (most of the diet centers were owned by Craig and her immediate family), saw that it could leapfrog its rival by exploiting Nutrisystem’s cumbersome decision-making process. Almost immediately after identifying an opportunity to sell a new line of frozen foods, Jenny Craig invested heavily in that product line and its requisite storage capacity. Nutrisystem, which struggled to gain consensus among its hundreds of independently owned franchisees to invest in yet another product improvement, could not respond to Jenny Craig’s move, lost considerable market share, canceled its IPO, and was eventually acquired.

Combined Arms.

By creatively combining complementary weapons, the practitioner of maneuver warfare can create a situation in which “to counteract one [attack], the enemy must become more vulnerable to another.” This makes the effectiveness of a commander’s arsenal greater than if the weapons were deployed individually. As is the case with the concept of focus, however, the problems of scarcity and a lack of fungibility can limit the degree to which resources can be combined.

On the front lines, combined arms implies the integration of weapons-allocating, coordinating, and targeting as evolving conditions and tactical objectives require. In Operation Desert Storm, for instance, the U.S. Marine Corps relied heavily on simultaneous direct fire, artillery, and air attacks, synchronized by frontline observers and pilots, to create shock, terror, and chaos among more heavily equipped Iraqi forces. At a higher level, combined arms involves selecting and arranging various combat assets to provide the commander with a fighting force tailored to the mission at hand. For example, Napoléon invented the army corps to enable greater dispersion and speed among his forces. Consisting of infantry, artillery, and cavalry, the corps operated as a coordinated, self-sufficient entity that could move more rapidly with less logistical support requirements than conventional force configurations and deliver more combat power because of the complementary nature of its assets.

Duke Energy’s asset-backed approach to the trading of electric power exemplifies the merits of combining complementary assets and capabilities—in Duke’s case, the power-generation plants it owns, the hydrocarbon-based fuels they consume, and its energy-trading operations. Duke’s physical assets provide its traders with insights into supply conditions and a competitive advantage over rivals. Those assets also confer on the traders a tactical advantage—opacity of intent—because competitors can never be certain whether Duke’s traders are simply bidding up prices or purchasing power for the company’s plants in order to meet demand. Conversely, Duke’s traders are a useful source of market intelligence to those managing the company’s physical assets. For example, its traders can identify opportunities for the company to sell certain fuels on the open market at a higher return than could be realized from burning those fuels in Duke’s generation plants. And when traders identify arbitrage opportunities across regional power grids or across time, Duke can sell the output of its plants to areas where electric power prices are highest or sell guarantees of future output in derivatives markets.

An Integrated Attack

While each of the preceding elements of maneuver warfare represents a valuable concept on its own, the benefits of this combat philosophy are most fully realized when the elements work together. Capital One’s emergence as a leading credit card issuer in the 1990s is an excellent example of the power that the full integration of maneuver warfare concepts can have.

The credit card operation of Signet Bank until it was spun off in a public offering in 1994, Capital One has enjoyed explosive growth. From 1992 to 1996, its customer base grew fivefold, receivable card balances increased from $1.7 billion to $12.8 billion, and its bad-loan write-offs were among the lowest in the industry. Since Capital One went public, its revenue has grown at a nearly 40% compounded annual rate, earnings have grown at more than a 20% rate, and return on equity has remained above 20%—a record of double-digit performance in these three areas unmatched by any company in the S&P 500.

Capital One’s success was based on targeted marketing and differential pricing campaigns, which were made possible by the systematic gathering of detailed customer information. Employing sophisticated data-mining techniques and simple screening mechanisms, the company identified the most profitable customers and determined which combination of price and characteristics would make a product desirable to each one of them.

Capital One began by targeting critical vulnerabilities of commercial banks that offered credit cards: their obliviousness to the significant differences in profitability among customers and the potential of exploiting these differences. Absent this insight, banks offered uniform prices based on average costs.

Having identified this opening, Capital One weighed the risks of its unproven concept—high start-up costs with a small customer base and the considerable lag time between market testing and payback (if any)—against the potential benefit of redefining the credit card market. Despite the rejection of its idea by 16 of America’s largest banks, Capital One made the massive investments in formation technology the new approach required. The boldness of the move was highlighted by the company’s initial difficulties: From 1989 to 1991, for example, Capital One’s losses from its credit card portfolio doubled.

To carve out its place in the industry, the company relied heavily on stealth to surprise its competitors. For example, it used a difficult-to-detect direct mail campaign to poach customers from unwitting banks. And it hired consultants on a limited basis so that none ever saw enough of a product to reverse-engineer it. In addition, it avoided industries where regulation would have required it to reveal its pricing models.

Capital One initially adopted a narrow focus on a small yet highly profitable segment of the market: cardholders who carried a high recurring balance, presented a relatively low risk of default, and displayed a willingness pay high finance charges. Although the company has since broadened its customer profile—for example, it now issues secured cards to people not deemed creditworthy—it still uses sophisticated customer analyses to create the most enticing offers.

Even in its early days as part of Signet Bank—when it was a nearly autonomous subsidiary—Capital One embraced decentralized decision making. It has continued to rely heavily on the judgment of talented problem solvers who, at the point of decision, interpret trial data and identify profitable market opportunities.

It has also maintained a rapid tempo, refining its offerings so frequently that established players have found themselves in a constant state of reaction—often to one of Capital One’s earlier moves. For example, when AT&T’s Universal Card finally responded with a differential-pricing technique of its own, Capital One had 300 offerings to AT&T’s 30.And when AT&T matched Capital One’s 300, Capital One had more than 1,000.

Finally, Capital One deployed in an unprecedented manner what were essentially combined arms: risk management and marketing. Aligning its data-mining, targeted marketing, and differential-pricing techniques helped the company maximize sales volume as well as minimize exposure to bad loans by selecting desirable customers and balancing risk with adjusted expected return.

More interesting than the fact that Capital One applied all these elements is the way in which these concepts complemented and reinforced one another. For example, Capital One’s use of surprise to stealthily pick off competitors’ customers was reinforced by both the boldness and the focus of its initial attack. The audacity and long odds of the company’s offensive meant that competitors dismissed the threat at first; the attack’s narrowness and precision made it less immediately noticeable.

Capital One’s efforts to maintain a rapid tempo in order to keep competitors off balance were reinforced by the company’s decentralized decision making. Because front-line managers could quickly refine or add product offerings without having to wait for approval from superiors once removed from the action, competitors were constantly forced to play catch-up.

But the full potential of decentralized decision making wouldn’t have been realized if it was used just to maintain a blistering pace. The freedom of frontline managers to continually fine-tune their product offerings ensured that Capital One maintained its razor-sharp focus on attracting and retaining only the most profitable customers. In addition, these managers were encouraged to identify and attack the critical vulnerabilities of companies in new markets—such as automobile leasing and cell phone bandwidth reselling. In doing so, the individual frontline managers exercised reconnaissance pull, effectively moving the organization as a whole to a position of new strategic advantage.

Turning the Tables

We wouldn’t be honest if we didn’t note that maneuver warfare has its detractors. Over the past 20 years, competing schools of thought within the U.S. military have debated its merits against those of attrition warfare, which is based on overpowering rather than confounding the enemy. Some well-respected military figures have voiced skepticism about maneuver warfare, saying that it represents little more than common sense and is backed by selective historical examples of victors defeating inept opponents.

We would argue, however, that history has proven maneuver warfare extremely effective in varying and adverse conditions. Accordingly, it is a useful guide for strategic business thinking, particularly in the fast-paced, complex, fluid, and uncertain business environment of the twenty-first century. Companies that can effectively shape the conditions governing competitive encounters will flourish; those that cannot will fail. Perhaps more significant, companies that “win” using outdated strategies—for example, through lengthy wars of attrition, such as protracted price wars—may find themselves so exhausted that their executives, their shareholders, and their market valuations do not recover for some time.

Companies that “win” using outdated strategies—for example, through protracted price wars—may find themselves so exhausted that their executives, their shareholders, and their market valuations do not recover for some time.

Employing maneuver warfare concepts requires the same things of business executives as it does of military commanders: “the temperament to cope with uncertainty…flexibility of mind to deal with fluid and disorderly situations…a certain independence of mind, a willingness to act with initiative and boldness, an exploitative mindset that takes full advantage of every opportunity, and the moral courage to accept responsibility for this type of behavior.”

The importance of this last point cannot be overstated. Maneuver warfare is not a prescription for “fighting dirty.” Rather, it is a prescription for “fighting smart”—one recognizes the ethical implications of each action you take. In business, as in war, the line between these should never be crossed. Integrity and self-discipline on the part of both the military and the business practitioner of maneuver warfare are paramount.

Finally, given the fact that for every move there is a countermove, maneuver warfare practitioners must constantly be aware that rivals could be employing the very same concepts to shape the conditions of the competitive encounter in their favor. One need only recall how the Germans, the modern progenitors of maneuver warfare, were deceived about the location of the D-day invasion.

Indeed, two decades after Merrill Lynch stole a march on rivals with the introduction—and deceptive downplaying—of the cash management account, eTrade and Charles Schwab employed the concept of rapid tempo to attack the brokerage giant. The upstarts used their relative speed advantage to enter the on-line trading market more quickly than Merrill Lynch, with its large brokerage force, was able to do. As a result, Merrill Lynch was put on the defensive and had to scramble to catch up.

Thus, identifying one’s own vulnerabilities from a maneuver warfare perspective is absolutely essential to a company’s survival in the short term. Over the long term, the practitioner of maneuver warfare must ensure that his mastery of its principles evolves ahead of competitors’—or risk an unexpected and humiliating defeat.

Eric K. Clemons is a professor of operations and information management at the University of Pennsylvania’s Wharton School of Business in Philadelphia.

Jason A. Santamaria is an associate at Morgan Stanley in New York. He served as an artillery officer in the United States Marine Corps from 1994 to 1998.

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